Nifty Fut (July) closed at
8342.50 on Friday and overall, closed the Post-Brexit week
(8355) almost flat.
Technically, looking
ahead, sustaining below 8335 NF may again fall to 8290*-8230
and 8180-8110 & 8030-7920 area in the next few trading
sessions.
On the other side, NF
need to sustain above 8395-8415 for gaining more strength up
to 8450-8510 and 8685-8785 in the short term.
As par monthly EW cycle,
NF may be in the B Wave now and the corrective target may be
around 7800-7600 unless and until, it closed above 8415 on a
consecutive basis for at least 3 days.
Globally, there was no fresh
scary "Brexit" news, but Italy banking crisis (NPL) and concern
over China Yuan devaluation depressed the sentiment. China is
basically devaluing the Yuan in the cover of "Brexit" and
exporting its deflation all over the world and it seemed that no
one is caring for that as of now (all are too much concerned about
Brexit now).
In UK, all eyes will be on
the BOE (14-th July) and the market is expecting rate cut by
0.25% (present BOE rate 0.50%). It will be only in Aug'16, that
BOE may be more dovish after studying the "Real
Brexit"/uncertainty scenario and may increase the QE and keep
the rate near zero.
Incidentally, UK business
secretary is now on a tour to India/UK/China/Japan/South Korea
for a discussions regarding revised trade agreements and trading
relation in the "Post Brexit" scenario.
Globally, all eyes will be
on the next week's China data (CPI/Trade Balance/GDP/IIP), EURO
Group Meetings, US Retail Sales/CPI.
Yesterday, the much awaited
June NFP (287 k) released in US and its way above of market
expectation (175 k), but hourly earnings is below expectation at
0.1% (YOY:2.6%) and unemployment rate increased to 4.9% from
4.7% and most of the job gains are in the low paid hospitality
and leisure sector.
The May NFP further revised
down to 11k from 38k and with the latest June NFP of 287k
(preliminary) two months average is now around 149k.
Overall, the 3 and 6 months
revised NFP average is now at 147.33k & 171.5k which is
weaker than the 2015 average of 228k.
The wild swing in the May
& June NFP despite the Verizon employee strike factor (38k
in May), is confusing for the analysts and may also cast some
doubts about the authenticity of the NFP data, because in
June,there was high expectation of a FED rate hike and the May
NFP was a great excuse for Yellen to stay at sidelines.
Similarly, after Brexit referendum, there will be no question
for a July/Sep rate hike and subsequently NFP jumped in June and
the 6 months average is now hovering around 171.5k, just below
the comfort level of FED(at 200k).
Thus going forward, FED may
talk hawkish or dovish (cyclical verbal intervention to keep the
USD in the desired level), but in reality, they may never hike
again, even if Trump win the presidency. But, the never ending
QQE may not be a real solution like "Brexit", which is more
political in nature. Decades of QQE is also responsible for
today's demand & supply mismatch dynamics of some of the
commodities like Oil, Steel etc.
In any way, S&P-500
Fut (SPF) at CMP 2120.75 rallied near all time high (2133) and
going ahead, technically a break of above 2140 zone, it may
further surge towards 2171-2193-2211-2230* & 2255-2290
area in the near to long term; otherwise it will come down
again towards 2075-1982 level.
Some of the primary
reasons behind rally in SPF may be:
1. Perpetual QQE by the
central bankers and probability of FED will be on hold forever
(at least till 2018, until cloud of Brexit uncertainty clears)
and may even cut again to return to ZRIP.
2. "Blockbuster" June NFP
report; but auto sales nos and some other economic indicators
may be also indicating a probability of GDP contraction
(recession) in the coming months in US.
3. Stock "Buy Back" theme
amid lower treasury yields.
Some of the tailwinds may
be:
1. "Brexit" uncertainty.
2. China jitters (Yuan
devaluation & credit bubbles).
3. Banking crisis (NPL) in
Italy.
4. Win of Presidency by
Trump, who is highly unpredictable.
Domestically, our market will look into:
1. Q1FY17 result, starting
with Indusind Bank on 11-th July and Infy on 15-th July.
2. Passage of GST in the
forthcoming Parliament session starting from 18-th July. There
is speculation that Govt may introduce the bill on the 1-st day
itself and Cong is gradually softening its stance, because of
fear of "political isolation", but may stick to its core demands
of 18% GST rate along with a " legal ring fencing" mechanism, so
that in future rate may not be increased abruptly and inclusion
of petrol, diesel, alcohol, electricity and tobacco in the GST
ambit along with a GST redressal authority. Sticking with these
demands may help Cong for its apparent "Pro-People" (lower GST
rate) image and not surrendering to the changed "Political
reality" after recent set backs in Kerala & Assam election.
But the overall result of the recent state elections may not
help BJP also in the RS seats calculation and except Assam, it
has not gained too much. On the other hand, regional political
parties has more edge than the two main national party (Cong
& BJP), which may bring more uncertainty in future.This
time, Cong may provide direct or indirect support for passage of
GST, because it may help it to recover from its present
"obstructionist" image and actual implementation of GST by
April'2017, may have a direct inflationary effect on our economy
(at least initially as service tax will increase from present
15% to 18%+), which may also help Cong in the 2019 election. So,
it will be very interesting to see that Govt (BJP & RSS) is
also really serious to implement it before 2019 election on the
pretext of various legislative regulations. Also, we may see
some "Parliament logjam" because of various political issues and
controversies by both BJP & Cong and some other regional
political parties too. So, it may not be a smooth affair too for
the passage of GST in the RS this time also.
3. Appointment of new RBI
Gov. As par some reports, Govt may be zeroing on Subir Gokran.
4. Actual progress &
distribution of monsoon.
5. Results of PSBS in Q1 for
an idea about their NPLS trend (dilemma of "Twin Balance sheets"
challenges in India).
Among all these volatile
news flow, technicals may guide us a great----stay with us.
Article Courtesy:Frontiza.com
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